Masters Moment

The majority of the golf and club market is enjoying a period of stability that is a welcome relief from ten years of contraction, consolidation, and member attrition/transition.

The Masters is the Super Bowl of golf, and I tune into the broadcast Wednesday through Sunday every year at work and at home so that I don’t miss a moment. The tournament never disappoints and watching Sergio Garcia win his first major was a fitting conclusion to another year steeped in tradition, sportsmanship, and superb play.

Augusta National’s emotional tribute to Arnold Palmer Thursday morning was first-class and Jack Nicklaus’s tip of the hat to Arnie before he hit his ceremonial first tee shot is a moment that will be long remembered.

But that wasn’t my Masters Moment. Strangely enough, my moment this year took place on Wednesday morning, before the competition even began.

Billy Payne, Chairman of Augusta National, was answering questions following his State of the Masters address when someone asked the inevitable question about the state of golf. (I wonder if reporters get to draw straws to see who will ask this forever question?)

The Chairman’s answer distinguished between the game itself (good shape) and the business of golf (mixed results) and the point he made in so many words is that golf owners/operators, like those in any business, perform at varying degrees of success. The message was clear: There are winners and losers.

Payne’s answer was not a revelation; however, he framed it in a way that I had not heard before. The moment stuck with me, and I was reminded of it shortly after the Masters, when two National Golf Foundation (NGF) reports crossed my desk. First was the 2017 Summary of Golf Facilities in the U.S., and second was the 2017 Golf Participation Report. A short review of history will put the data in these reports into perspective, and confirm Payne’s message.

Between 1986 and 2005, we added 4,000 new golf facilities in the U.S., a 44% increase in inventory, fueled largely by real estate development. Growth in golf participation followed, but not by 44%. The tide turned in 2006, when course closures outpaced openings for the first time, and this trend continued through 2016, resulting in a net reduction of 1,000 courses, a decline in inventory of 6%.

Closures are projected to outpace new openings for the foreseeable future, albeit at a reduced rate. Still, the oversupply of courses vs. demand speaks to Payne’s comment about mixed results for operators.

Conversely, the Golf Participation Report paints a brighter picture, confirming Payne’s comments on the state of the game.

According to the NGF, while the overall number of golfers in the U.S. declined in 2016 by a modest 1.2% to 23.8 million, that decrease is attributed to players categorized as Fringe/Unengaged—a group that averages less than five rounds played per year. On the other hand, the number of Committed Golfers—a group that accounts for 95% of annual rounds played—rose for the first time in five years, from 19.5 to 20.1 million.

Most significantly, 2.5 million beginning golfers—those playing on a course for the first time ever in 2016—joined the game. This number surpassed the previous record set in 2000 at the height of the Tiger Woods phenomenon. These beginning golfers are also changing the face of the game in a healthy way, as 34% of them are female and 32% are non-Caucasian.

Augusta National and Payne live in pretty rarified air, but he got it right. The majority of the golf and club market is enjoying a period of stability that is a welcome relief from ten years of contraction, consolidation, and member attrition/transition. There will continue to be winners and losers in golf, just as there are in any industry.

We report every month on the winners and their strategies and investments— and fortunately for all of us, there are plenty of you out there.